Long Oil Heat, Inc. v. Spencer

Decision Date25 March 2019
Docket Number1:16-cv-00899 (BKS/DJS)
Citation375 F.Supp.3d 175
Parties LONG OIL HEAT, INC. d/b/a Long Energy, Plaintiff, v. William SPENCER, Thomas Spencer, North East Freightways, Inc., and Phillip J. Palker, Defendants.
CourtU.S. District Court — Northern District of New York

For Plaintiff: Robert E. Ganz, Lippes Mathias Wexler Friedman LLP, One Columbia Circle, Albany, NY 12203.

For Defendants Northeast Freightways, Inc. and Phillip J. Palker: Joseph J. Manna, Lipsitz Green Scime Cambria, LLP, 42 Delaware Avenue, Suite 120, Buffalo, NY 14202, Michael J. Lambert, Michael R. Stanley, Sheehan Phinney Bass & Green, 255 State Street, Boston, MA 02109.

For Defendants William and Thomas Spencer: Daniel J. Martin, Robert F. O'Neill, Celeste E. Laramie, Gravel & Shea PC, 76 St. Paul Street, 7th Floor, P.O. Box 369, Burlington, VT 05402.

MEMORANDUM-DECISION AND ORDER

Hon. Brenda K. Sannes, United States District Judge

I. INTRODUCTION

Plaintiff Long Oil Heat, Inc., doing business as Long Energy ("Long Oil"), brings this diversity action against Defendants William Spencer ("William"), Thomas Spencer ("Thomas," together with William, the "Spencers" or the "Spencer Defendants"), North East Freightways, Inc. ("NEF"), and Phillip J. Palker to recover unpaid balances for fuel oil services Long Oil provided to Land-Air Express of New England, Ltd. ("LAE") until May 2016. (Dkt. No. 2). Although the Complaint also named LAE as a defendant, (id. ), LAE stipulated to entry of judgment, (Dkt. No. 50), and partial judgment was entered against it in the amount of $ 204,733.58 on December 7, 2018, (Dkt. No. 51). Plaintiff's claims against the remaining Defendants include claims for: (1) breach of contract against NEF (third cause of action), (Dkt. No. 2, ¶¶ 29–33, 62); (2) personal guaranty against Palker (fourth cause of action), (id. ¶¶ 34–36, 62); (3) account stated against NEF and Palker (fifth cause of action), (id. ¶¶ 37–38, 62); (4) improper dissolution against William and Thomas Spencer (sixth cause of action), (id. ¶¶ 39–43, 62); (5) fraudulent conveyance against all Defendants (seventh cause of action), (id. ¶¶ 44–51, 62); and (6) unjust enrichment against NEF and Palker (eighth cause of action), (id. ¶¶ 52–62).1 Plaintiff has moved for summary judgment on all its claims against the remaining Defendants, (Dkt. No. 64); the motion is opposed by Defendant NEF,2 (Dkt. No. 73), and the Spencer Defendants, (Dkt. No. 75-1). Defendants NEF and Palker have cross-moved for summary judgment against Plaintiff on all claims, (Dkt. No. 67); Plaintiff opposes the cross-motion, (Dkt. No. 70). For the reasons set forth below, Plaintiff's motion is granted in part and denied in part, and Defendants NEF and Palker's cross-motion is denied in its entirety.

II. FACTS3
A. LAE's Business and Commercial Relationship with Long Oil

Plaintiff Long Oil is a New York corporation based in Albany County, New York, that provides fuel oil and other petroleum products to residential and commercial customers. (Dkt. No. 64-20, ¶ 1; Dkt. No. 67-3, ¶ 12). From 2012 to 2016, Long Oil provided LAE, a transportation company, with fuel for its trucks at LAE's Capital Region facility in Colonie, New York. (Dkt. No. 64-20, ¶ 2; Dkt. No. 67-3, ¶ 13). The fuel was stored until needed in a 3000-gallon fuel oil tank owned by Long Oil and maintained by it under a permit from the Town of Colonie. (Dkt. No. 64-20, ¶ 3).

LAE is a Vermont corporation headquartered in Williston, Vermont, and founded in 1990 by Defendant William Spencer and his father. (Id. ¶ 4; Dkt. No. 67-3, ¶ 7; Dkt. No. 64-8, at 18). It operated as a regional transportation company in the "less than truckload" ("LTL") sector in New England, New York, and New Jersey. (Dkt. No. 64-20, ¶ 5; Dkt. No. 67-3, ¶ 7). The LTL sector covers shipments for more than 100 pounds but less than a trailer load, (Dkt. No. 64-8), and generally involves business-to-business transactions and some residential transportation, (id. ; Dkt. No. 64-20, ¶ 5). LAE's real estate subsidiary, Land Air Terminals, Inc., owned four of the 13 facilities from which LAE operated—in Williston, Vermont; Windsor, Vermont; Londonderry, New Hampshire; and Pittsfield, Maine. (Dkt. No. 64-20, ¶¶ 6, 40). Defendant Thomas Spencer, William's younger brother, joined LAE in 1993. (Id. ¶ 7). Initially, William's father owned 100% of LAE, but he eventually transferred his ownership interest to his sons, granting each of them a 50% stake. (Id. ; Dkt. No. 67-3, ¶¶ 9–10). William became LAE's president, and Thomas held various positions in operations and sales. (Dkt. No. 64-20, ¶ 7).

B. LAE's Financial Difficulties

At the end of 2015, LAE was in a "[h]ighly leveraged" financial situation, having borrowed to acquire a variety of assets. (Dkt. No. 64-8, at 20). After a "thorough audit," the Federal Motor Carrier Safety Administration ("FMCSA") revoked LAE's operating authority between December 28, 2015 and January 8, 2016. (Dkt. No. 64-8, at 21; Dkt. No. 64-20, ¶ 8; Dkt. No. 67-3, ¶ 24). The shutdown caught LAE "off guard," (Dkt. No. 64-8, at 21), and caused the company further financial difficulty. (Dkt. No. 67-3, ¶ 25).

William started looking for financial assistance within the industry. (Dkt. No. 64-20, ¶ 8). He received a call from his friend Defendant Philip Palker, the founder of Defendant NEF, a New Hampshire company4 involved in a different segment of the transportation industry in New England and surrounding regions—namely the "full truckload quantity business" (i.e., loads heavier than LTL) and "dedicated logistics" (i.e., "providing a fleet of trucks for a customer ... [who] can then dictate what the logistics are with them") in primarily business-to-business transactions. (Dkt. No. 64-8, at 22–24; Dkt. No. 64-16, at 12; Dkt. No. 67-4). In a January 8, 2016 email to Palker, William explained that his plan was to "[c]lose out NJ operation to return to our routes in NE/NY," "[p]roduce about 50M [in] revenue," and "[f]ile for protection and move on with our business." (Dkt. No. 64-7, at 1). He added that he needed "help to get over the days ... lost" and was "[w]illing to give equity of course." (Id. ).

After sending that email, William continued to have conversations with Palker and other possible investors about "what any of them would be willing to do to help," and he sent Palker financial information on LAE. (Dkt. No. 64-8, at 27–28). In particular, William was looking for a loan to cover payroll. (Id. at 33). On approximately January 13, 2016, William met with Palker and Dick Anagnost, NEF's co-owner,5 at Anagnost's Manchester office. (See Dkt. No. 64-8, at 33–34; Dkt. No. 64-16, at 21–22; Dkt. No. 64-13, at 29–31). William asked for a loan to cover payroll. (Dkt. No. 64-8, at 33). Anagnost further testified that William asked him to consider an investment in LAE. (Dkt. No. 64-13, at 38).

The meeting resulted in a January 13, 2016 agreement among Anagnost Investments, Inc., William, Thomas, and LAE, whereby Anagnost Investments agreed to provide LAE a $ 551,657.81 payroll loan secured by commercial mortgages on Land Air Terminals' four real properties and personally guaranteed by William and Thomas. (Dkt. No. 64-7, at 2–3; Dkt. No. 64-20, ¶ 12; Dkt. No. 67-3, ¶¶ 29–30). Additionally, the agreement provided that William and Thomas would "pledge all of their stock interest in Land-Air as collateral for the performance of the personal guaranties" and "convey sixty percent (60%) of their interest in Land-Air to Anagnost [Investments]." (Dkt. No. 64-7, at 2). The parties agreed to "restructure Land-Air such that the board of directors shall be comprised of five (5) individuals," with three individuals appointed by Anagnost Investments and two individuals appointed by William and Thomas. (Id. ). Finally, "Dick Anagnost ... shall be, and hereby is, appointed Treasurer of Land-Air and shall have sole and exclusive control over the financial affairs of the corporation with singular authority to execute checks and control all bank account[s] of the corporation." (Id. ). He could "only be removed by a unanimous vote of the board of directors." (Id. ). According to William, however, no stock was ever conveyed to Anagnost Investments, LAE's board of directors was not restructured, Anagnost Investments did not exercise its option to purchase LAE's stock, and Anagnost never became treasurer of LAE. (Dkt. No. 64-8, at 35–36; Dkt. No. 67-2, ¶¶ 19–20).

C. Communications with Vendors

After the January 13 agreement, Palker and Anagnost's staff began communicating with LAE's lenders, vendors, customers; they also had extensive communications with LAE's comptroller, Melissa Adams, and other employees. (Dkt. No. 64-20, ¶ 14). In his communications with vendors, Palker distinguished between accounts payable that became due before NEF's involvement and those that arose after. (Dkt. No. 64-20, ¶ 15). Using LAE letterhead and signing as its representative, Palker sent letters to vendors stating that, on January 13, 2016, LAE had "entered into an agreement with investors to strategically realign its regional operations" and that "[p]art of the agreement is that all existing vendors must establish a new vendor account with a net 30 day repayment term." (E.g. , Dkt. No. 64-7, at 7). Palker further represented that "[a]ll invoices due and payable prior to January 13, 2016 will be reviewed and scheduled for repayment after a 120 day grace period from the date of this letter" and that "[p]ayment terms will be 5 years with a 3.0% interest rate starting 01 May 2016." (Id. ).

In communications with fuel vendors, Palker characterized the financial backing of LAE as an investment. (See Dkt. No. 64-17, at 30, 55–58; Dkt. No. 64-7, at 22 (January 19, 2016 email from Palker to fuel vendor F.L. Roberts mentioning Anagnost Investments as an "investor"); id. at 43 (January 26, 2016 email from Palker to fuel provider Goetz Energy, referring to "the acquisition of 60% of [LAE's] stock by North East Freightways along with its...

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